Mining investment hits record high

Clancy Yeates

SEVERAL huge liquefied natural gas projects have pushed committed investment in the resources sector to a record $268 billion, the government's commodity forecaster says.

But in a sign of the growing risks to the investment pipeline, the Bureau of Resources and Energy Economics has warned that cost blowouts and weak conditions could constrain future spending growth.

Figures published on Wednesday said there were 87 major projects in Australia worth a collective $268 billion that had been given the green light to proceed.

While the number of ''committed'' projects had fallen since April, their total value had increased by $8 billion thanks to the expansion of the LNG project in Queensland and upward revisions to project costs.

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With business leaders warning Australia will face a ''growth cliff'' as investment dries up, the bureau also reported a slowing in the number of projects that had progressed from being potential to committed developments.

In the past six months, the bureau said 10 projects worth $13.2 billion had been approved in a financial decision, compared with 21 projects worth $45 billion approved in the six months before April.

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Resources Minister Martin Ferguson said the total investment was equivalent to the amount the United States spent on the Apollo moon program in the 1960s and 1970s, but said further spending depended on controlling costs.

"Even with such a pipeline of investment there is no doubt that we are entering a challenging phase,'' Mr Ferguson said. "In the face of lower commodity prices, the delivery of this pipeline of projects is contingent on keeping production costs down, providing access to skilled labour and increasing our productivity and efficiency.''

The numbers also underlined the critical role of mega projects, worth more than $5 billion, which accounted for three quarters of the pipeline of committed developments.

Despite the mounting concerns about investment dwindling, the Bureau of Statistics said construction work done rose 1.7 per cent in the September quarter.

The mining sector drove most of this growth. It expanded by 3.8 per cent over the quarter compared with 0.6 per cent in the residential building sector.

Despite the overall increase, the annual pace of expansion in engineering construction has slowed to 14 per cent, from 31 per cent in the June quarter.

Citing this deceleration, Deutsche Bank economists Adam Boyton and Phil O'Donaghoe said ''we may be starting to see the first signs of the investment boom coming off''.

Fresh details on the strength of the mining boom will be published Thursday when the ABS releases its latest data on planned spending for the September quarter.